Federal Commitments Total $5 Trillion

There is a rising tide of negativity about “bailout nation.”  Public opinion has been in opposition each step of the way, most recently on the auto bridge loan, announced today and analyzed by us here.

The problem in the media characterizations is that everything is described as a “bailout” since that is the story that plays.  There is also special emphasis on what the taxpayer will get in return, judged on the basis of investment potential.

Get serious!  The government is not a hedge fund.  The purpose of these actions is not a specific return on investment, but avoiding the collapse of the economy.  Many of the commitments have specific collateral.  Many are short-term in nature and some have already been repaid.  Others are showing a profit.  These are not just grants, and certainly not all “bailouts.”

It is typical media punditry.  Describing a program as a bailout is an easy and popular story.  The source attracts many readers, blog hits, or ratings.  Analyzing the public policy costs and benefits is more difficult and pretty boring.

Readers can get some clarification from this interesting interactive graphic from Slate, allowing you to see the timeline and terms of each decision.

Investment Take

The investment conclusion starts with the notion that almost no one has any confidence in the specific plans or the effects, one of our items on the Wall Street Truthiness list.

We plan more detailed discussion, but the broad concept is easy.  Few of the existing pundit opinions and none of the econometric models allow for much impact from these programs.  Meanwhile, we have efforts of unprecedented size.

There is a contrarian opportunity.


Originally published at A Dash of Insight and reproduced here with the author’s permission.